Business Law Prof Blog

Does Hobby Lobby Create a First Amendment Out for Fiduciary Duties?

So, the Hobby Lobby decision is out.  I wrote my thoughts here and here after oral arguments, and I think the court got this wrong.  Not the concept, but the execution. 

Rather than try to rehash what is now done, I will pose a different question: How does one reconcile this religious exercise with the profit-seeking mandate that the Delaware court imposes from time to time.  As Chancellor Chandler noted in eBay v. Newmark (more here):

The corporate form in which craigslist operates, however, is not an appropriate vehicle for purely philanthropic ends, at least not when there are other stockholders interested in realizing a return on their investment. 

Note that “purely” is not an entirely accurate modifier here.  Craigslist made a profit and had some ventures that raised money.  They just did not monetize the majority of the endeavors

So what about an entity that operates for purely religious ends? Hobby Lobby and those similarly situated seem to be saying that religion trumps profit (see, e.g., Chik_Fil-A closing on Sundays).  This is not the argument that our business model is stronger because of our choices, which I have argued before should be protected, but this is saying we choose religion over profit. 

As Chancellor Chandler noted in eBay, if there are no shareholders to complain, then perhaps it is not an issue.  Still, as soon as a shareholder disagrees, will decisions such as limiting healthcare options (thus limiting the talent pool for employees) or closing on Sunday?  It seems to me the Hobby Lobby decision has opened the door for several fiduciary duty fights down the road. 

Can a corporation now choose to give a majority of its funds to a church, even if it harms the entity?  I think no, but I hope, for the sake of businesses everywhere, the Court did not just create a First Amendment out to such fiduciary duties.

Reflections on Howard Henry Baker Jr. and the Politics of Hobby Lobby

Today, the body of former Senator Howard H. Baker Jr. lay in repose across the street from my office in the building that houses the academic center benefacted by and named after him.  (The building itself also bears his name.)  His coffin, draped elegantly in the American flag, is a reminder of a political era essentially gone--but not forgotten (at least by me). 

Senator Baker was a distinguished alumnus and benefactor of The University of Tennessee and the College of Law.  Our main rotunda on the first floor of the law building is named for him.  I dropped by today at the Baker Center for Public Policy to say goodbye to this revered statesman.  I did not make the trip across the street to pay my respects primarily because he was a UT alumnus or benefactor--or even because I knew him (although we shook hands and chatted pleasantly at least once that I can remember) or knew any member of his family.  I went because I deeply admire him and what he did with his public life.  He was the kind of guy--known as "The Great Conciliator"--who exhibited political patience, valued compromise, and didn't let party politics or ideology stand in the way of what he knew in his gut was right.

In the obituary published by the American Bar Association in the ABA Journal, the following quote caught my eye:

“We are doing the business of the American people,” Baker said in a 1998 speech to members of Congress, explaining his philosophy of government. “And if we cannot be civil to one another, and if we stop dealing with those with whom we disagree, or that we don’t like, we would soon stop functioning altogether.”

Of course, the last bit stings a bit in light of the recent government shutdown.  But . . . doing the business of the American people.  Hmm.  This part of the quote reminded me of the public fiduciary arguments that Donna Nagy raises in her 2011 Boston University Law Review article entitled "Insider Trading, Congressional Officials, and Duties of Entrustment."  A great read, for those who haven't yet set aside the time.

However, the quote also made me think about Senator Baker's engagements over the years with legal issues impacting businesses.  He was certainly pro-business, but he also fought for environmental protection and civil rights, among other things, even when those issues appeared, at least in the short term, to be a net negative for businesses.  What, then, would Senator Baker have said about today's decision in Hobby Lobby?  Well, we'll never know.  But I will take a few guesses, and those who knew him or know his politics better than I can feel free to question and correct my prognostications.

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No clear lines in the sand

From Anne Tucker (who is off filming academic videos this afternon--whatever that means!):

Today’s Supreme Court decision in Burwell v. Hobby Lobby Stores Inc. et al. exempted closely held corporations from complying with the contraceptive mandate in the Affordable Care Act.  There is plenty to debate about the opinion—corporations are persons under RFRA and can exercise religion as well as a host of choice quotes from the SCOTUS about “modern corporate law”—and I will leave that fun for another time.  I want to highlight three initial reactions:    

1. There is no definition of closely held in today’s opinion.  Will we draw lines based on state corporate codes and elections to be S corp?  Will we rely upon the IRS definition of a closely held company?  It is unclear.  There is NOTHING in the opinion that prevents today’s ruling from applying to publically traded, closely held corporations like Wal-Mart.  The line drawing engaged by the SCOTUS in Hobby Lobby is not such a neatly drawn, tight circle, but is a wide net.  I discussed this briefly in a HuffPost Live segment earlier today—here.
2. This is a statutory, not a constitutional ruling.  On its face.  Of course Congress could amend RFRA and exclude corporations, but there are exactly zero people holding out hope for that solution, at least in our present climate.  The language of the opinion, however, gives strong dicta supporting religious rights and identities of corporations, whether for profit or not.  [“Any suggestion that for-profit corporations are incapable of exercising religion because their purpose is simply to make money flies in the face of modern corporate law.”]
3. Today, the Court weighed in on the moral dilemma of performing an “innocent” act (i.e., providing health care coverage) that enables an “immoral” act (i.e., using an IUD whether for family planning or medical reasons).  May companies object to coverage that includes screening for sexually transmitted diseases because unwed employees may use it ensure safe, premarital sex?  The answer would seem to be yes. Of course, we can imagine that the Court would find a compelling interest here like they did with contraceptives, but what about the least restrictive means?  In Hobby Lobby, the Court found the existing program for the government to pay for contraceptives (for exempted nonprofit entities) as evidence of a less restrictive alternative.  So the government pays for the thing that for-profit corporations don’t want to pay for.  In other words, we now subsidize corporate religious beliefs. And if you are a corporation do you want to pay for something that competitors don’t have to?  The sincerity of the belief might be an issue, but if corporate law teaches us one thing, it is how to build a record.

-Anne Tucker

Formatting changes/errors are all mine.

Great work, Anne!

Hobby Lobby

The Burwell v. Hobby Lobby opinion is here.  5-4 in favor of Hobby Lobby. 

"As applied to closely held corporations, the HHS regulations imposing the contraceptive mandate violate RFRA.”

Sure that a number of us will have thoughts to share. 

The Flawed Mechanics of Mutual Fund Fee Litigation

I have been catching up on my long backlist of reading and recently read an excellent article on litigation challenging the fees of mutual fund advisers: Quinn Curtis and John Morley, The Flawed Mechanics of Mutual Fund Fee Litigation.

As you may know, section 36(b) of the Investment Company Act of 1940 gives mutual fund investors and the SEC a cause of action to challenge excessive investment adviser fees.
Section 36(b) has generated quite a bit of academic commentary; Curtis and Morley’s footnote listing those articles (fn. 4, if you’re interested) takes up more than a page of single-spaced text. The Supreme Court has also recently chimed in on section 36(b). Jones v. Harris Assocs. L.P., 559 U.S. 335 (2010) discussed the standard for reviewing advisors’ fees under section 36(b).

Don’t worry; Curtis and Morley don’t rehash all of the earlier commentary. Instead, they take the existence of a section 36(b) cause of action as a given and ask how it can be improved to better achieve its purposes. Here’s the abstract:

We identify a number of serious mechanical flaws in the statutes and judicial doctrines that organize fee liability for mutual fund managers. Originating in section 36(b) of the Investment Company Act, this form of liability allows investors to sue managers for charging fees above a judicially created standard. Commentators have extensively debated whether this form of liability should exist, but in this paper we focus instead on improving the mechanics of how it actually works. We identify a number of problems. Among other things, statutes and case law give recoveries to investors who did not actually pay the relevant fees. Statutes and case law also impose no penalties to provide deterrence; they treat similar categories of fees differently; they create an unusual settlement process that prevents litigants from settling their full claims; they expose low-cost advisers to serious litigation risk; they exhibit deep confusion about what makes fees excessive; and they provide unduly small incentives for plaintiffs’ lawyers that are only adequate in cases of low merit. Most of these problems appear to be the unintended results of accidents and confusion, rather than deliberate policy choices. We conclude by offering specific ideas for reform.

The article, to be published in the Yale Journal of Regulation, was posted on SSRN in March, but it’s been sitting in my computer reading file since then. Better late than never. If you’re interested in the regulation of mutual funds and investment advisers, it’s definitely worth reading.

Where should this go in your corporate law casebook?

I'm currently on a road trip, so I'll keep this short. Here's a cartoon our readers may enjoy that went just a tiny bit viral on Twitter this past week (ht @nminow):

"I, too, hate being a greedy bastard, but we have a responsibility to our shareholders." pic.twitter.com/eQao6bDOaj

— Stefan Padfield (@ProfPadfield) June 22, 2014

Halliburton II – An Unexpected Gift to Plaintiffs

So, Halliburton Co. v. Erica P. John Fund, Inc. (2014) (“Halliburton II”)  came down, and to call it a change in the law is too generous – at best, it might qualify as a “clarification.”  After all of the angst  over the possibility that the Court might give plaintiffs the burden of proving the price impact of a particular misstatement, the Court soundly rejected that argument, reaffirmed Basic, Inc. v. Levinson (1988), and instead merely allowed defendants to rebut the fraud on the market presumption.  Because demonstrating a lack of price impact is as difficult as showing price impact in the first place, I don’t expect Halliburton II to change much in existing law – if anything, some of the rhetoric may make matters easier for plaintiffs.

[More under the cut]

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Easterly on The Tyranny of Experts

On Steve Bradford’s recommendation, I chose William Easterly’s (NYU) The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor (2014) as the book for my annual beach trip with the in-laws and cousins. (Last year was Daniel Kahneman's (Princeton) Thinking, Fast and Slow – and yes, my wife’s side of the family makes fun of my beach reading material).  Easterly is an author I have wanted to read for a while now, and I still need to read some of his earlier books. 

More after the break.

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The Future of Higher Education

Previously, I have written about making MOOCs more effective and online v. in-person classes.  Today, I am writing about MOOCs, online classes in general, and the future of education. This will be a relatively short post because, of course, I don’t know what the future holds. But, after the break, I will take a few guesses based on what we are already seeing.

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Is corporate compliance being privatized?

I always enjoy reading Bryan Cave partner Scott Killingsworth's comments in various LinkedIn groups. In addition to practicing law, he’s a contributing editor to a treatise on the duties of board members. He’s just published a short but thorough essay on "The Privatization of Compliance." It reminds me of some of the comments that Dean Colin Scott made at Law and Society about tools of private transnational regulation, which include self-regulation, contracts, consumers, industry initiatives, corporate social responsibility programs and meta-regulators. Killingsworth’s abstract is below.

Corporate Compliance is becoming privatized, and privatization is going viral. Achieving consistent legal compliance in today’s regulatory environment is a challenge severe enough to keep compliance officers awake at night and one at which even well-managed companies regularly fail. But besides coping with governmental oversight and legal enforcement, companies now face a growing array of both substantive and process-oriented compliance obligations imposed by trading partners and other private organizations, sometimes but not always instigated by the government. Embodied in contract clauses and codes of conduct for business partners, these obligations often go beyond mere compliance with law and address the methods by which compliance is assured. They create new compliance obligations and enforcement mechanisms and touch upon the structure, design, priorities, functions and administration of corporate ethics and compliance programs. And these obligations are contagious: increasingly accountable not only for their own compliance but also that of their supply chains, companies must seek corresponding contractual assurances upstream, causing a chain reaction of proliferating and sometimes inconsistent mandates. 

This essay examines the origins and the accelerating growth of the privatization of compliance requirements and oversight; highlights critical differences between compliance obligations imposed between private parties and those imposed by governmental actors; and evaluates the trend's benefits, drawbacks and likely direction. Particular attention is given to the use of supplier codes of conduct and contractual compliance mandates, often in combination; to the issue of contractual remedies for social, process-oriented, or vague obligations that may have little direct bearing on the object of the associated business transaction; to the proliferating trend of requiring business partners to "flow down" required conduct and compliance mechanisms to additional tiers within the supply chain; and to this trend's challenging implications for the corporate compliance function's role and its interaction with operations, procurement, and sales groups. Recommendations are made for achieving efficiencies and reducing system dysfunction by seeking a broad consensus on generally accepted principles for business-partner codes of conduct, compliance-related contract clauses, and remedies appropriate to each.

 

Team Production Theory: A Break from SCOTUS Watch

For those of you needing a repreive from the breaking SCOTUS opinions this week and the rush to digest the latest in a string of controversial cases (and Hobby Lobby still hasn't come down), I come bearing gifts in the form of a classic:  Margaret Blair & Lynn Stout's A Team Production Theory of Corporate Law.  

I am home from a lovely conference at Seattle University School of Law's Adolf A. Berle Jr. Center on Corporations, Law & Society.  The conference (Berle VI)  focused on the team production theory as it was originally conceived, its role in scholarship over the last 15 years, and how it is an integral component of emerging scholarship.  Most of us are familiar with the seminal paper and its conceptualization of the firm as creating situations where different stakeholders invest team-specific resources creating nonseparable gains that aren't easily addressed by contract.  As most readers will know, Blair and Stout theorized that in this situation where various stakeholders make different types of investment (capital, human/labor, etc.) and where it is hard to tell what is earned from each separate contribution, that the stakeholders leave decisions up to the board of directors-- a mediating hierarchy--to apportion the gains and monitor the firm.  Their view of the firm and the role of the board of directors, as theorized in this paper, served as a challenge to shareholder primacy as the dominant theory of corporate law. Of course, most academics cite to this paper in doctrinal articles when establishing the landscape of corporate law theories. If you haven't read the paper completely, or haven't read it in a while:  do so.  It will be time well spent.  

If you aren't aware of the Berle Conferences, they are an incredible resource compiling established and emerging corporate law scholars on a variety of issues.  Prior papers, speakers lists and other information regarding the Berle Center is available here.  The team production theory papers will be published in a forthcoming issue of the Seattle University Law Review, and I will post an updated link.

Finally, for those of you still compiling a summer (or lifelong) reading list, I am adding Margaret Blair's 1995 book on corporate theory---Ownership & Control--which was the jumping off point for the team production theory and the catalyst behind two very successful corporate law scholars' careers.

Now you can go back to SCOTUS watch 2014.

-Anne Tucker

Halliburton? Ho, hum . . . .

Harumph.  Business as usual at the SCOTUS . . . .  As a student and teacher of Basic v. Levinson and its progeny, I guess I had hoped for more from the U.S. Supreme Court's opinion in Halliburton, released two days ago.  I haven't yet read all the articles on the case that were published since the release of the opinion (as usual, quite a number), so my thoughts here represent my personal reflections.

After engaging in some self-analysis, I have determined that my disappointment with the Court's opinion stems from the fact that I am a transactional lawyer . . . and the Court's opinion is about procedure.  Not that civil and criminal procedure do not impact transactional law.  Au contraire.  The procedure and substance of Section 10(b)/Rule 10b-5 claims are intertwined in many fascinating ways.  I will come back to that somewhat in a minute.  But the Court's opinion in Halliburton just doesn't satisfy the transactional lawyer in me.

This also is somewhat true of the SCOTUS opinions in both Dura Pharmaceuticals and Tellabs, which deal with pleading (in)sufficiencies in Section 10(b)/Rule 10b-5 litigation rather than (as in Halliburton) class certification questions.  In its class certification focus, Halliburton is much more the sibling of Amgen, which I find infinitely more satisfying because it (like Basic and Matrixx) focuses on materiality, which infuses all disclosure decisions.  All of these cases, however, center on a defendant's ability to get dismissal of an action at an early stage, something that defendants in Section 10(b)/Rule 10b-5 cases desperately want to do.  The longer the case goes on, the more incentive defendants have to settle--oftentimes (in my experience) foregoing the opportunity to defend themselves against specious claims because of the ongoing drain on financial and human resources.

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The Business Future: WVU Energy Law Fellowship/LLM Opportunity

The WVU College of Law's Center for Energy and Sustainable Development is seeking a fellow for 2014-16, and the details are below.  As I  have written before, the Future of Business is the Future of Energy. Just today, the New York Times Dealbook has an article, Norway’s Sovereign Wealth Fund Ramps Up Investment Plans, which notes: 

Norway’s giant sovereign wealth fund said on Tuesday that it would manage its $884 billion portfolio more aggressively over the next three years, taking larger stakes in companies and increasing its real estate portfolio.

. . . .

The fund’s investments have grown increasingly sophisticated under Yngve Slyngstad, the chief executive of Norges Bank Investment Management, who came to the fund in 1998 to build an equity portfolio and became C.E.O. in 2008. Since the end of 2007, equities have increased as a percentage of the portfolio to about 61 percent from 42 percent.

Mr. Slyngstad has also diversified the holdings into smaller companies and into emerging markets, but the stock investments remain concentrated in Europe and North America. The fund’s largest equity holdings are all companies based in Europe, including Nestlé, Novartis, HSBC Holdings, the Vodafone Groupand Royal Dutch Shell.

The fund has been under pressure from environmental groups and some political parties in Norway to shed investments in oil and natural gas and coal companies and to increase its green investments. The government has so far largely resisted. It created a panel of experts this year to study the issue.

Understanding the interplay between energy, finance, and the environment is becoming more and more critical to businesses (and their lawyers).  Please share this opportunity with anyone you know who might have an interest in exploring this area. 

FELLOWSHIP IN 
ENERGY AND SUSTAINABLE DEVELOPMENT LAW
FOR 2014-16

Accepting Applications Until June 30, 2014

West Virginia University College of Law’s Center for Energy and Sustainable Development is now accepting applications for a Fellowship in Energy and Sustainable Development. The fellowship combines the opportunity to work with attorneys, faculty and students at the Center for Energy and Sustainable Development with the opportunity to obtain the WVU Law LL.M. degree in Energy and Sustainable Development Law. The LL.M. program provides a uniquely deep and balanced curriculum in perhaps the nation’s richest natural resource region. The fellowship position involves policy and legal research and writing, and assisting with organizing projects such as conferences and workshops.

The Center for Energy and Sustainable Development

The Center is an energy and environmental public policy and research organization at the WVU College of Law. The Center conducts objective, unbiased research and policy analyses, and focuses on promoting practices that will balance the continuing demand for energy resources—and the associated economic benefits—alongside the need to reduce the environmental impacts of developing the earth’s natural resources. One mission of the Center is to train the next generation of energy and environmental attorneys. The Center benefits from being located on the campus of a major research institution, with expanded opportunities for inter-disciplinary research and an integral role for the Center in providing the policy, legal and regulatory analyses to support the technical research being conducted across the WVU campus.

LL.M. in Energy and Sustainable Development Law

The WVU College of Law LL.M. in Energy and Sustainable Development Law is the only LL.M. program in the United States that provides a balanced curriculum in both energy law and the law of sustainable development. Working with WVUCollege of Law’s Center for Energy and Sustainable Development, LL.M. students will develop the expertise to advise clients and provide leadership on matters covering the full range of energy, environmental and sustainable development law. The LL.M. in Energy and Sustainable Development Law provides a broad and deep offering of courses, experiential learning opportunities, and practical training for every part of the energy sector. Our broad spectrum of courses allows our students to prepare to be lawyers serving energy companies, investors, environmental organizations, landowners, utilities, manufacturing companies, lawmakers, policymakers, regulators and land use professionals.

Energy and Sustainable Development Law Fellow

This fellowship is a part-time (at least twenty hours per week), two-year position from August 2014 through July 2016. The Fellow will receive an annual stipend of $20,000 and tuition remission for the LL.M. program. The Fellow would take 6-7 credits per semester allowing time for part-time work at the Center. The Fellow will further the work of the Center by pursuing research on issues relating to energy and sustainable development law and policy, under the direction of the Center’s Director and the WVU Law faculty associated with the Center. The Fellow will be expected to generate policy-oriented written work to be published through the Center and other venues such as law journals. The Fellow will also assist with projects relating to the Center’s programs, including organizing conferences and other events, and public education and outreach efforts. Efforts will be made to match project assignments with the Fellow’s interest.

Fellowship Qualifications

Candidates should possess a J.D.; a strong academic record; excellent analytical and writing skills; a demonstrated interest and background in energy, sustainability or environmental law and policy; and admission to the LL.M. program at West Virginia University College of Law (application for LL.M. admission can occur concurrently with the fellowship application).

Applicants should apply to [email protected]. Please submit a letter discussing qualifications and interests, a resume, a law school transcript, a recent writing sample and contact information for three references.

We are now accepting applications. The application deadline is June 30, 2014(concurrent with the deadline for admission to the LL.M. program) or until the post is filled.

Visit our website at http://energy.law.wvu.edu/ for more information about our programs.

West Virginia University College of Law is an equal opportunity employer and has a special interest in enriching its intellectual environment through further diversifying the range of perspectives represented by its faculty and teaching staff.

The Framing Effect in the Corporate Purpose Debate

Happy summer! Now that the summer solstice has passed, if you’ve ever wondered about language choice and the effects it might have on corporate behavior and objective, I invite you to check out an essay I recently made public. Spoiler Alert: I am a Seuss fan - the essay was written in conjunction with a symposium on Dr. Seuss™ and Civil Society so it requires some willing suspension of disbelief… although not entirely because I do believe that the core proposition made is sound. Here’s a short abstract:

While sustainability proponents have been building their case for why corporations should care about more than profits, this essay argues that the case for sustainability or "CSR" cannot be successfully made without engaging with the entrenched norm of shareholder primacy. This essay makes the modest yet underexplored claim that any attempt to amend, rewrite, interrogate, or, at the extreme, debunk the shareholder primacy/private purpose view of the corporation must successfully counter the “framing effect” and “framing bias” that shareholder primacy enjoys.

The full essay is available here. And if you're in the mood for something even more off the beaten path, there is a poem in the addendum. I invite you to add your own lines/verses...

Meinhard, Salmon, and the Expressive Role of Judicial Opinions

This past week, I joined a group of our business law prof colleagues at the National Business Law Scholars Conference out at Loyola Law School in Los Angeles.  Headlined by a keynote presentation on "the audience" for business law scholarship from Frank Partnoy and an author-meets-reader session on Michael Dorff's new book, Indispensable and Other Myths: The True Story of CEO Pay, the conference featured a staggeringly interesting array of panels on everything from standard corporate governance to financial regulation.  Kudos to the planning committee.

Steve Bainbridge presented Must Salmon Love Meinhard? Agape and Partnership Fiduciary Duties in an opening concurrent panel. If you haven't read it yet, I recommend it.  Admittedly (as I told Steve), I have an especial interest in the Meinhard case and in the expressive function of decisional law.  But most of us in the business law professor group teach the case in one course or another, and his paper is relevant to many in that context.

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New Edition of Basic Accounting Principles for Lawyers

I hope you will excuse some self-promotion, but the third edition of my book Basic Accounting Principles for Lawyers is now available.

For those of you who aren’t familiar with the book, it’s a short, introduction to accounting principles and the accounting environment. It’s aimed at students (and lawyers) who know nothing about accounting; I try to keep the discussion as light and non-technical as possible, with a little humor sprinkled here and there. It's intended to be used as a supplement in courses that draw on accounting, but you can also use it to pick up some accounting on your own without falling asleep. (No guarantees.)

Support a starving artist and buy a copy.

ICYMI: Tweets From the Week (June 22, 2014)

"the origins and the accelerating growth of the privatization of compliance requirements and oversight" http://t.co/yEPTP0s4x3 #corpgov

— Stefan Padfield (@ProfPadfield) June 16, 2014

"permitting corporate managers to ignore ... stakeholder interests [has become] morally untenable" http://t.co/n7XejW1SEJ #corpgov #socent

— Stefan Padfield (@ProfPadfield) June 18, 2014

"less than 6% of CEO positions of top companies worldwide are held by women" http://t.co/mKvYMmCfTJ #corpgov

— Stefan Padfield (@ProfPadfield) June 19, 2014

with "the triple bottom line ... sustainability has been perverted to represent sustainable profits" http://t.co/zPBQfIqnDh #corpgov #socent

— Stefan Padfield (@ProfPadfield) June 19, 2014

.@jimcramer "Calling Out Private Equity" http://t.co/TPnBVGYOAU

— Stefan Padfield (@ProfPadfield) June 20, 2014

Increased director independence as a substitute for regulatory intervention

Professor Urska Velikonja has just published a new article arguing that the trend toward corporate boards with a "supermajority" - not merely a majority - of independent directors is part of a strategy by large institutional investors and corporate managers to fend off more substantive forms of corporate regulation that would reduce shareholder wealth.  Her thesis is that when corporations engage in risky and illegal behavior, they - and their shareholders - capture gains while externalizing losses; thus, large shareholders and managers have an interest in staving off real regulation.  The easiest way to do that is by advocating for greater board independence - it's functionally a call for self-regulation. 

I think the thesis has an intuitive appeal - similar to, for example, The Failure of Mandated Disclosure, which, as Steven Bradford pointed out, argues that we too often default to additional and wasteful disclosures as a substitute for substantive regulation (see also Joan Heminway's post on disclosure creep).

In the case of Professor Velikonja's argument, though, I think the picture is slightly more complicated.  Many institutional investors are employee or union pension funds - in other words, their beneficiaries are exactly the third parties to whom corporate misbehavior is externalized.  It's not obvious that they, or the funds who represent them, would prefer less substantive regulation, even if it resulted in lower corporate profits; however, the fund fiduciaries - in their capacity as fund fiduciaries - only have limited tools available to protect their beneficiaries.   They can advocate for better corporate governance, but it's not obvious that they can, consistent with their fiduciary obligations, advocate for greater corporate regulation.  (David Webber discusses some of the limits of fiduciary pension plan discretion in The Use and Abuse of Labor's Capital).  Anyway, given these constraints, I am not certain that it is fair to say that institutional investors as a group prefer to advocate for corporate governance reforms over more meaningful regulation - for at least some of them, their options may be somewhat limited.

Nussbaum on Liberty of Conscience

In various airports and airplanes over the past few weeks I read University of Chicago professor Martha Nussbaum’s (University of Chicago) book on religious equality in America entitled Liberty of Conscience (2008).  Even though this book predates the Hobby Lobby case, it addresses a number of underlying issues at play in the case. 

More after the break.

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Online v. In-Person Classes

I’ve recently returned from taking a course on negotiation at Harvard Law School.  This was an in-person course where I was a student, which gives me something to compare my MOOC experiences to as I address the topic of online v. in-person classes.  I provide a few of my thoughts on the topic after the break.

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